Question
On January 1, 2017, Fisher Corporation purchased 40 percent (80,000 shares) of the common stock of Bowden, Inc. for $976,000 in cash and began to
On January 1, 2017, Fisher Corporation purchased 40 percent (80,000 shares) of the common stock of Bowden, Inc. for $976,000 in cash and began to use the equity method for the investment. The price paid represented a $60,000 payment in excess of the book value of Fisher's share of Bowden's underlying net assets. Fisher was willing to make this extra payment because of a recently developed patent held by Bowden with a 15-year remaining life. All other assets were considered appropriately valued on Bowden's books. Bowden declares and pays a $92,000 cash dividend to its stockholders each year on September 15. Bowden reported net income of $402,000 in 2017 and $346,000 in 2018. Each income figure was earned evenly throughout its respective year. On July 1, 2018, Fisher sold 10 percent (20,000 shares) of Bowden's outstanding shares for $332,000 in cash. Although it sold this interest, Fisher maintained the ability to significantly influence Bowden's decision-making process. Prepare the journal entries for Fisher for the years of 2017 and 2018.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started